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Worms + garbage = green success

Story Highlights

• Experts say organic fertilizer market growing rapidly
• Horticulturists: Bugs eat up harmful organisms, make for improved garden
• One company chief says it's fun to make millions, "while saving the world"
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(CNN) -- Add heaps of red worms to mountains of raw, rotting garbage. Then collect the worms' feces, brew it into a liquid, and squeeze it into a used soda bottle.

Sound like a twisted fourth-grade boy's concoction for messing with his sister? Not quite. Rather, it is TerraCycle's formula for success in the growing, if messy, organic fertilizer business.

Sales of organic products, especially food, have surged of late. But the National Gardening Association estimates just 5 percent of the $8.5 billion U.S. fertilizer and insecticide industry is all-natural, with uncertainty about what "organic" means muddying the picture, according to experts.

"Everybody and his cousin wants to go green these days, and in my view, it's about time," said gardening association research director Bruce Butterfield, citing a national survey conducted by Harris Interactive for his group. The study found surging interest in organic gardening out of sync with actual use of all-natural fertilizers. "If I had to grade homeowners on how environmentally responsible they are [gardening and landscaping], they failed."

That may be changing, with market researchers Freedonia Group estimating 10 percent annual growth for the organic fertilizer market, twice the projected growth for all lawn and garden goods.

With its unique reused packaging, pervasive product placement and rapid growth, TerraCycle is among several companies aiming to make a positive environmental impact -- and a buck.

"We're not doing this to save the environment," said co-founder and CEO Tom Szaky, 25, a Hungarian-born, Canadian-bred Princeton drop-out whose company was recently recognized as having a "net zero" negative impact by the nonprofit environmental group, Zerofootprint. "We're doing this to show you can make a lot of money while helping save the environment."

The 'organic' market

Worms' ground-grubbing, waste-eating ways are legendary in both horticultural and waste-management circles. California's Integrated Waste Management Board ranked "Keep worms in your office," No. 2 on last fall's top 10 list of ways to recycle on the job. But worms are hardly the only creatures working in the organic fertilizer business.

Chickens are partly to thank for reportedly rising sales of "Cockadoodle DOO," while fish provide the fodder for the Neptune's Harvest line of organic fertilizers, to cite two of many examples.

Horticulturists note, too, that "good" bugs can eat up harmful organisms to improve a garden's health. Plus, scores of other non-animal but all-natural materials -- from alfalfa to zinc sulfate -- are often used to invigorate plants.

Going "all natural" outdoors -- rather than injecting chemicals into plants and the soil -- makes sense, said Jody Payne, a horticulturist and curator at the New York Botanical Garden.

"It's just like thinking about fast food: You're much better off eating carrots and broccoli and fresh roasted chicken, and staying away from anything that's processed," said Payne, noting that natural microbes protect plants by targeting dangerous pathogens. "Plus, organic fertilizers work over a longer period of time [than chemical fertilizers]."

But buyers of "organic" fertilizer don't necessarily get what they bargained for, said Dave DeCou, executive director of the Organic Materials Review Institute, a private non-profit group that certifies organic products. Individual states, while they coordinate efforts through the Association of American Feed Control Officials, decide whether a fertilizer can be deemed "organic."

Such labels have existed for decades, with some companies holding firm to their "organic" brand even as standards have gotten tougher.

"People think, 'I can use that and it'll [help grow organic food] like what I buy in the store. But it's not,'" said DeCou, adding some officials have created a higher-standard label noting "organic inputs" were used. "Businesses are actually selling products that often cannot [satisfy] the organic definition."

A dirty business

Such regulatory confusion and business battles have created "tension between the old guard and the new guys," said DeCou. That has made it challenging for young companies like TerraCycle, which for years survived month-to-month off winnings from business plan competitions and the sporadic generosity of "angel" investors.

Many of TerraCycle's breakthroughs came out of necessity, albeit conveniently married to its pro-environment, anti-waste mantra. Once, when short on cash, TerraCycle placed liquid fertilizer in used, plastic soda bottles scooped off the streets rather than buy new or recycled bottles.

That packaging is now its most distinctive feature. Even the spray-tops are half-price leftovers from other manufacturers, while the boxes used to transport bottles are cast-off misprints. All labels, however, are custom-made.

"[Sometimes] we have no other choice and have to come up with a way to solve a problem," said Szaky. "If people just commit themselves to it [and] think outside the box, the solution is almost always there ... Every time someone says it's impossible, that's just more fuel to make it work."

Paced by its enthusiastic leader, TerraCycle has emerged as an eco-capitalist success story. Placing 30,000 gallons of worm fertilizing brew into 50,000 bottles a week, its products can be found in 7,000 locations, including CVS, Home Depot and Wal-Mart stores. Having grossed around $500,000 in 2005 (five times its inaugural year's sales), Szaky estimates 2007 revenues -- fueled by expansion into Target and elsewhere -- may jump from more than $1.5 million in 2006 to $5 million.

Still, TerraCycle is not alone in its mission or ambition. Fellow upstart Organic Growing Systems cited increased demand in announcing plans last month to double production of its fertilizers. Larger companies have also entered the fray, including Spectrum Brands' "Garden Safe" line and Miracle-Gro's "Organic Sense" range of products. And Dennis Blank, editor of Organic Business News, notes that Chinese firms have increasingly become a force in the organic fertilizer market.

"You have a lot of growth, [especially] as more and more [vendors] that historically tried to sell to organic farmers target the home marketplace," said DeCou.

These companies generally share a focus on boosting their bottom lines while doing their part for the environment. That unique altruistic/capitalistic mix excites Szaky, a born entrepreneur who launched five businesses before his 20th birthday.

"People ... enjoy being part of a company that can make millions while saving the world," said Szaky, likely reflecting the views of many of his organic fertilizing competitors. "It's all about the excitement of growing something."



Worms

Red worms and garbage are the keys to TerraCycle's fertilizers, which are packaged in old plastic bottles.

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